I’ve missed posting for a couple weeks. I’ve experienced some minor computer problems, but I’ve also been rethinking how this work can be most useful and what I really want to accomplish with it. Based on my experiences, both good and bad, with investing, I understand that it’s extremely easy to get caught up in the reasoning for making trades, increasing risk by increasing trading, and eventually running into trouble. It’s very hard to remain disciplined. As a result, I’m not sure that I’m doing anyone favours by suggesting that a certain stock or asset class is poised to do well in the near term. Looking at the actual output of my model, it’s been right more often than wrong. At the same time, it has increased volatility and trading costs, and I’m not currently in a position to evaluate whether or not the increased performance is worth the increased costs.

With that in mind, I’m going to continue comparing the recent performance (using exponential moving averages) of asset classes (represented by ETFs) and individual stocks to point out where some risks and opportunities may lie. But more changes may be in store over the coming months.

Neither stocks nor bonds have positive momentum, and neither has an advantage over the other. They both had a slightly negative week, and both are basically flat over one month and three months.

Chinese stocks (FXI) have the best momentum currently, followed closely by Hong Kong stocks (EWH) and US small caps (IWM). I’m surprised to see US small caps outperforming US large caps, which usually don’t diverge too far.

Among individual large-cap stocks, in the US, only Gilead Sciences (GILD) appears attractive in the near-term. Here in Canada, Valeant Pharmaceuticals (VRX) continues its amazing run, and Catamaran Corp (CCT) also has reasonable momentum. That company provides pharmacy benefit management services and healthcare information technology. I think I detect a theme.

Market Outlook June 8, 2015

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